ByJosh Mitnick, CorrespondentOctober 4, 2010

Palestinian laborers work atop a building under construction as a section of the controversial Israeli barrier is seen in the background in the West Bank Jewish settlement of Har Gilo near Jerusalem, on Oct. 3.

Tel Aviv, Israel — Sputtering Israeli-Palestinian peace talks received another reprieve over the weekend when a key Arab League meeting was postponed until Friday. It was the second delay for the meeting, which Palestinians said could mark their withdrawal from negotiations if Israeli settlement expansion continued.

Mr. Netanyahu insists a permanent settlement freeze is off the table. Mr. Abbas insists on such a freeze as a precondition for continued talks, since he argues that expanding the amount of territory under Israeli control is antithetical to negotiations designed to eventually reduce the Israeli presence in the occupied territories.

While that bodes ill for much progress, let alone a final peace agreement within a year, as President Obama's administration says is still possible, there is still some hope that a workable compromise can be found.

"Things are really stuck right now. It seems the US is trying to devise an attractive enough set of assurances to give Netanyahu cover at home without undermining Palestinian confidence in the negotiating process, which is a tricky balancing act,'' said Scott Lasensky, a fellow at the US Institute for Peace, a nonpartisan think tank in Washington.

Compromise

Netanyahu avoided being specific about what steps will be taken from the Israeli side on Monday. "We are at the height of sensitive talks with the American administration," he told his cabinet. Israel is "calmly considering the picture far from [the] spotlight and will act calmly."

But the contours of a possible compromise, at least from an Israeli perspective, were outlined in press reports in the past few days. Those indicate that Netanyahu is mulling a temporary two-month settlement freeze in exchange for several major promises from Obama.

The London-based Arab-language daily Asharq Alawsat reported on Monday that Netanyahu had given an agreement in principle to the idea of extending a settlement moratorium in return for US guarantees, which appeared to lend credence to a report at the end of last week from the Washington Institute for Near East Policy (WINEP), a think tank that supports strong US-Israel ties.

WINEP fellow David Makovsky reported that the US has offered in a letter to: allow Israel to station troops on the West Bank's border with Jordan in order to prevent arms smuggling, enhance military assistance, veto any UN Security Council resolutions connected to the Arab-Israeli conflict for one year, and make no further requests for settlement freezes. In exchange, Israel would freeze settlement expansion for 60 days.

Mr. Makovsky went on to say that If Israel declined the offer, the US indicated it might give the Palestinians a commitment that any territorial compromise with Israel be based on the 1967 Green Line, Israel's border before it seized territory in the wake of the Six Day War.

The liberal daily Haaretz said that Netanyahu is going to discuss a freeze extension at a Wednesday meeting of his security cabinet.

Netanyahu declined to directly respond to any of the specific reports, though he did say that much of the news has been inaccurate. The prime minister's "no comment" is fueling expectations that a deal might be in the works.

``[The comment] is an indication that what Netanyahu said was his final position, isn't final,'' said Gershon Baskin, co-director of the Israel Palestinian Center for Research and Information, who speculated that the prime minister is under pressure from Israel-friendly allies in the US to change his stance. "Bibi's basic inclination is to say no. Maybe the Americans have sweetened the offer."

Digging in

For the moment, the Palestinians are indicating that a temporary, one-time only freeze is not sufficient. On Saturday, a top body of the Palestine Liberation Organization reaffirmed that building must stop before Abbas pushes forward with peace talks.

Palestinian spokesman Ghassan Khatib says he didn't have any knowledge of a letter sent to Netanyahu by the Americans. "We don’t know what the letter is about. And we can’t comment on it," he says. "We have no problems with guarantees from the Americans about Israeli security as long as it doesn’t infringe on the legitimate rights of the Palestinians.’’

He said that an Israeli military presence in the Jordan Valley would be a deal-breaker. "This is unacceptable. President Abbas said the the two state [solution] should not allow any Israeli presence in the Palestinian state. An international military presence, however, would be acceptable."

The peace process has become bogged down on the issue of building in the settlements – which the Palestinians say is a key indication of Israel's seriousness, but would be made moot if the sides could reach an agreement on a mutual border.

Lasensky at the USIP says: "The principal challenge for the US right now is to move the conversation decisively back to the terms of peace, and away from important but ultimately peripheral issues."